China's Race for AI Supremacy defeating USA

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China's adoption of artificial intelligence: implications and opportunities

TIMESTAMPS:

00:00 Intro
00:25 Key Points
01:11 China has a strong AI Foundation based on Research
02:11 Numerous Companies & Industries Poised to benefit
02:59 China's Semiconductor Industry
03:20 Asian Industries in AI/ Asia AI Industry
03:50 Conclusion

Since late 2022, when OpenAI’s ChatGPT exploded onto the scene, the generative artificial intelligence (AI) platform has experienced exponential adoption in a way that is extremely rare for new technologies. ChatGPT was estimated to have reached 100 million users in just two months.1 It took Netflix 10 years to reach 100 million users; six and half years for Google Translate; roughly two and a half years for Instagram; and about nine months for TikTok.2,3 Given this backdrop, it is not surprising that expectations regarding generative AI’s potential to create lucrative new business models and nurture new technology companies have surged.

Key Points
* The rapid adoption of generative AI platforms like ChatGPT has raised investors’ expectations about the technology’s potential to create lucrative new business models.
* US-based tech companies have largely dominated the conversation around generative AI thus far, but that could change as Chinese heavyweights like Baidu enter the fray.
* China appears well positioned to benefit from the AI trend, due to the country’s massive amounts of data, skilled workforce, supportive government policies, and advanced manufacturing base.
What Is Generative Artificial Intelligence

China Has a Strong Foundation Based on Research
In the past decade, China has built a solid foundation to support its AI economy and made significant contributions to AI globally. In 2021, China produced the largest share of the world’s AI conference publications at 27.6%, versus 16.9% produced by the US. Today, AI adoption has ramped up in many industries beyond tech to include finance, retail, government, and telecommunications. The Chinese government has already released supportive policy guidelines to foster investments in AI-related fields.

China has a competitive advantage in its huge engineering talent pool. Over the next five years, 50 million graduates are set to enter the workforce in China, more than the US, Germany, Japan, Korea, and Southeast Asian countries combined.6 The share of the population with a university degree exceeded 15% in 2020, up more than 65% from 10 years ago, with many of those graduates in science, technology, engineering, and math (STEM) fields.7 A large pool of engineers, especially software engineers, could continue to support strong growth in AI development.

Numerous Companies and Industries Appear Poised to Benefit

Baidu, which runs China’s most popular internet search engine, is positioned to be one of the leaders in generative AI in China. Baidu has had an early start on AI technology, particularly on natural language processing (NLP), given the close synergy to its core search business.

Alibaba, and Tencent also have the potential, and have shown ambition, to develop generative AI models, given the sheer amount of data these companies possess. ByteDance has always utilized algorithms to analyze user preferences in its popular TikTok app. Therefore, content generation using AI technology, whether for text, images, or videos, could blend in naturally with its existing business. Additionally, the development of generative AI could help improve the overall monetization/pricing opportunities for Baidu, Alibaba, and Tencent’s cloud services.

China’s semiconductor industries could benefit from the infrastructure investment required for generative AI. The development of advanced AI models and the ensuing blossom of new products will likely require significant investments in computing power to support operations. This would probably benefit China’s (and Asia’s) high-performance computing-related semiconductor supply chains. Specifically, an increase in demand for AI accelerators, such as graphics processing units (GPUs) and application-specific integrated circuits (ASICs), could benefit the foundry industry, as most AI accelerators are produced via fabless business models, which rely on foundries to make their chips. Additionally, AI and machine learning (ML) applications will likely demand better memory performance and more bits, while equipment makers could benefit from strength in semiconductor demand driven by increasing AI-related workloads.

Conclusion

Recently, US-based tech companies, such as OpenAI, Microsoft, and Alphabet, have dominated the AI conversation. However, that may well change, given developments from the likes of Baidu, as well as China’s strong foundation for continued AI development. Massive amounts of data, a skilled workforce, government support, and an advanced manufacturing base all augur well for the long-term development of China’s AI capabilities.